Value of Information in Competitive Economies with Incomplete Markets

Abstract

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive equilibrium of a generic economy, we can find a finer information structure such that an allocation that is resource feasible and measurable with respect to this information ex-post Pareto dominates the given equilibrium allocation.Competitive Equilibrium, Incomplete Markets, Value of Information.